By Nicholas Dockerty
The writing on the wall was there for all to see. The monthly US non-farm payroll data had analysts pointing to a 160,000 gain but the actual number of only 54,000 jobs gained surprised many market analysts who saw it as further evidence of the US economy struggling to grow.
We’ve had some more lacklustre economic indicators since then. The Federal Reserve Bank of New York’s manufacturing index fell to a negative 7.8 in June from a positive 11.9 in May with notable contractions in both shipments and new orders visible. US Retail sales decreased in May too, down 0.2% from the previous month.
Factor in rising prices – inflation hit an annualized 3.6% in May – and suddenly you’ve got near perfect conditions for economic stagnation.
But, it’s worth remembering that financial markets are said to climb a wall of worry and that means the negatives tend to be magnified and the positives sometimes brushed aside as just the way things should be. So we should also record, that US producer prices increased at the slowest rate for ten months in May and that the recent tragic events in Japan has had a major affect on supply chains across the US.
A point that was re-iterated by the recent release of the Fed’s latest anecdotal Beige Book which revealed more details about the widespread disruption to US supply chains after the devastating tsunami in Japan.
And the US trade gap narrowed to $43.7 billion from $46.8 billion in April after a reduction in Japanese imports.
However, with the second quantitative easing programme finishing at the end of June and an election to win next year, will President Obama change his demand-side-based policies and move toward the supply-side favoured by the Republicans?
These are uncertain times in Europe too. As eurozone finance ministers continue to fail to come to an agreement concerning Greece’s new financial aid package, a fresh round of protests is taking place on the streets of Athens fuelled by the austerity measures already implemented by the Greek government.
What the future holds for a eurozone that’s becoming increasingly politically and economically fractured is still not certain. Could the same be asked about the US and its economy?
With the Dow Jones index being in a steady decline for the last month and with triple-digit intra-day falls becoming more and more common, there’s no need to question what financial investors and traders think.
One way of keeping right up-to-date with what is happening in forex the financial markets is via the YouTube channel of financial spread betting company IG Index.